How the SWOT analysis helps organization on their decision making?

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  • Anonymous
    1 decade ago
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    'SWOT' stands for Strengths, Weaknesses, Opportunities and Threats.

    Organisations use this to analyse the internal and external business environments to build their strategies on, and use it to achieve their goal.

    It works like this; say for example if Company X were to begin exporting Food Product M to Country Y;

    They would need to identify STRENGTHS. They may for example have more than enough capital (money) to carry out the campaign, and they may have a high enough production capacity to benefit from 'economies of scale'. Company X could use these strengths to their advantage and incorporate them into their strategy.

    Company X would need to identify it's WEAKNESSES. Company X's brand name and reputation might be weak, so they would need to find a way to work around that weakness.

    There would also be some OPPORTUNITIES to look out for in the external environment, for example, Country Y's government may offer incentives to attract FDI (foreign direct investment). So to take advantage of this, Company X may buy over a factory in the host country and out-source local workers to produce the goods. Also by manufacturing the goods close to it's buyers, the company could cut down it's logistics costs.

    There may also be THREATS to look out for, such as cultural differences. The Country Y may have a high muslim population, so to successfully market it's product there, the company may need to substitute some of the ingredients of Food Product M to make it suitable for its market.

    So you see, the SWOT analysis is a very useful tool to brainstorm what can be used and what should be avoided to make a strategy work, and to decide whether the idea should be pursued or not.

    Source(s): Sorry, a bit long. But I hope you find some of it useful.
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